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Negative Interest Rate & Consumer Consumption Curve

 
 
Edza
 
Reply Mon 16 May, 2016 10:50 am
Hey guys I've got this question for HW. Does anyone know how to draw a diagram for this? At the moment all I'm seeing is an increase income which will shift the income curve to the right and onto a new Indifference curve.

Question: Assume all your income is spent on two goods: mortgage (in which the price of mortgage is the interest rate) and a composite good (in which its price is $1). With the help of a diagram, explain how a negative interest rate affects your optimal basket of these two goods.
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